European Union diplomats are trying to reach agreement on a new treaty enforcing stricter budget rules in the eurozone and other participating countries, but obstacles remain to securing a deal amid efforts to soften some of the measures. The final draft of the treaty should be ready on Thursday for Europe's political leaders to consider, Ireland's prime minister Enda Kenny said.
All EU countries except Britain are expected to sign off on the pact when leaders meet at a summit on January 30. But preparatory talks ended last week with differences still unbridged and the European Central Bank unhappy with the direction of the talks. Central to the treaty is the enforcement of the rule for a broadly balanced budget, which says countries should not spend more than they earn in tax and other revenue over the medium term.
The treaty sets a deficit limit at 0.5 percent of a country's gross domestic product in structural terms. Germany has insisted on the pact, which would make it possible for signatories to take other countries to the European Court of Justice (ECJ), the EU's highest court, if they believe the rules are being breached. "The treaty has symbolic value for the Germans," said Daniel Gros of Brussels think tank, the Centre for European Policy Studies. "The other countries are going along with it because they hope it will allow Germany to do more for them."
"A small group in Berlin believes it is necessary to give the European Court of Justice power. And it might give (German Chancellor Angela) Merkel the justification to help other countries more." The agreement is also expected to call on countries to transpose the balanced-budget rule into their national constitutions, although there is some leeway.
Both measures are designed to make the policing of spendthrift states legally watertight, an attempt to prevent a repeat of the sovereign debt crisis of the past two years. Much of what is in the new pact is already part of existing European Union law.
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